IHT complexity is driving an increase in the need for financial advice

Four in five over-45s say IHT is too complicated, as uptake of estate planning advice rises

*Canada Life’s 2019 IHT Monitor*

Four in five (80%) over-45s believe current inheritance tax (IHT) rules are too complicated, up from 77% last year

Over two fifths (42%) have sought professional estate planning advice – a sharp increase on the third of over-45s (32%) who said the same in 2018

But over-45s are overestimating the size an estate needs to be for it to be worthwhile to seek financial advice

The number of over-45s* seeking professional estate planning advice has risen sharply in the last year as confusion over inheritance tax (IHT) rules persists, according to Canada Life’s 2019 IHT Monitor.

Four in five (80%) over-45s believe the current IHT rules are too complicated, up slightly from 77% last year. At the same time, more than two fifths (42%) say they have sought professional estate planning advice – a sharp increase from the 32% of over-45s who said the same in 2018.

In January 2018, the Chancellor ordered a wide-ranging review of the inheritance tax system by the Office of Tax Simplification to investigate whether the current rules create any distortions to taxpayer decisions. The Chancellor asked for proposals for simplification in order to ensure the system is fit for purpose.

Despite the increase in the number of over-45s seeking estate planning advice, a significant proportion are overestimating the size an estate needs to be for it to be worthwhile seeing a financial adviser.

Two thirds (64%) of over-45s believe they need assets worth more than £350,000 to see a financial adviser. In reality, it is common for those with estates worth £250,000 or more to seek estate planning advice. It is perhaps one of the most prevalent misconceptions about financial advice – that individuals need a significant amount of assets before seeking the advice of an estate planning adviser becomes worthwhile.

Instead of seeing a financial adviser, three in ten (30%) over-45s admit they would take estate planning advice from their solicitor, while a fifth (19%) would seek advice from family and friends. When it comes to planning their estate, three in ten (28%) are using their pension, a quarter (24%) are using ISAs and a fifth (20%) are using a trust in their will.

Neil Jones, Senior Technical Manager at Canada Life, commented: “It is no surprise that the current inheritance tax rules are too complicated. The Chancellor’s review into the inheritance tax system is welcome, but his calls for simplification are long overdue.

“Despite the persistent confusion, it is encouraging to see a significant number of over-45s seeking financial advice, up from last year. While seeing your solicitor or asking friends and family for help with estate planning might be easier, the only way to properly cut through the red tape is to tap into the years of experience and expertise of a financial adviser.

“One of the most common misconceptions is that a person must have a certain estate size before it becomes worth their time consulting a financial adviser. In reality, people with estates valued at £250,000 would potentially benefit from seeking professional estate planning advice, just like those with more valuable estates.

“Of course, it’s not just about those who are giving the inheritance. Those who will inherit these estates also need to consider the impact on their own inheritance tax position.”

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